Investors ignore the boring facts in favour of new and exciting stories, which are further enhanced to suit investors’ biases;

Investors tend to believe, rather than be naturally skeptical.

Hardwired For Poor Decision Making

Montier also stated that in decision making the
brain defaults naturally to an “emotional system”. People tend to focus
on short-term gratification, leading to quick and easy decisions. Also,
people tend to dislike social exclusion behaviour, preferring to follow
the herd instead. This emotional system, he claims, exerts less energy
compared to objective thinking.

Despite our beliefs that we are logical and rational decision makers, we are hardwired for poor decision making.

Is There A Way Out Of Behavioural Pitfalls When Investing?

Yes, and one such way out is the Dollar Cost Averaging (DCA) method.
It is a method that sticks to a strict investment schedule regardless
of how the markets are performing. It is very mechanical and there are
no emotions involved.

In Conclusion

Having emotions per se isn’t a bad thing but not
many people can remain calm and collected when the stakes are high in
decision making. However, recognising that emotions are an innate
weakness when it comes to decision making is as good as taking the first
step towards successful investing.